No one buys a house to think a few years down the road it will go into foreclosure. While foreclosure rates aren’t as high as during the 2008-2009 financial crisis, there are warnings that the global pandemic events of 2020-2021 will play a massive part in how borrowers manage their repayments. Only time will tell how many Americans will face foreclosure in 2021. With reports suggesting that a third of the 18 million homeowners in the US alone are facing foreclosure, this could dramatically affect the housing market with more homes coming to the market as banks look to recoup what they have lent to borrowers. It helps knowing your options when facing forclosure.
Receiving a notice of delinquency is a scary time; however, you won’t initially be at risk of losing your home immediately. You have a short grace period to work with your lender to discuss your option from here.
One way to avoid or prolong foreclosure is to educate yourself. Foreclosure happens when you stop paying your mortgage payments resulting in you breaking your contract with your mortgage provider. The provider will then seek to claim back your home as a way to get around the money they are owed.
Educate yourself on the rules regarding foreclosure in your state, your lender’s usual history when it comes to foreclosure and your rights and options legally regarding communicating and offers of repayment if applicable. Educate yourself on the process and what happens next should the lender foreclose, and you lose your home, especially if you feel there may be excess funds after the sale. Tiffany Bucher with Foreclosure Excess Proceeds can assist you in this process.
Call Your Lender
Your next option is to call your lender and see how you can avoid foreclosure. Make an appointment, and look at all your options presented to you carefully. Typically, your lender could offer you one of the following four options to help you avoid foreclosure.
- Repayment plan
- Loan modification
Explain your situation and actively look for solutions you can realistically take.
Bankruptcy is an extreme measure. However, it may be that you can use this option to keep your home. Depending on the bankruptcy option, you may be able to save your home. Chapter 7 bankruptcy will wipe out all of your debt, and your non-exempt assets will be sold off. Chapter 12 bankruptcy will allow you to keep your home, but a repayment plan will need to be arranged to pay off what you owe. Both will have a drastic effect on your credit rating but may offer you an alternative to foreclosure.
Short Sale Option
A short sale is when you agree with your lender to sell the property at a loss. In this case, the lender has full control over what is accepted in repayment for what you owe. This isn’t always an option that lenders offer, but it is worth asking and knowing all your options. If you cannot make your repayments or come up with a suitable and affordable repayment plan, this could be an alternative to foreclosure.